Is Liquidity Based on the Industry?

As executives and firms start their journey to increased liquidity, we suggest small steps and a focus on small things. Our research shows that executives that take joy in small things successfully achieve bigger things. Taking small steps helps executives increase their breadth of knowledge, develop a learning orientation, and commit to becoming more liquid, i.e., to increase personal and organizational liquidity. I begin with the case of reskilling (increasing breadth of knowledge). Successful executives typically start learning areas that they are uncomfortable with, such as web design or computer language. They take immense joy in each small step of their learning journey (e.g., design of a web page, successful running of a program), which allows them to learn continuously. Similarly, in rescaling (releasing time for higher-level thinking), executives can do small things to reduce the time taken up by routine work and increase time for strategic thinking and innovation. As an example, an executive programmed her inbox to sort email in the order of importance and time to respond, which increased her time for strategic thinking. She continues to take joy in tinkering with the program to increase her efficiency in non-strategic tasks. Focusing on small things can also be done at an organizational level. Successful executives identify processes that take time or have high failure rates. Then, they work to improve the liquidity of these processes, involving multiple stakeholders and finding joy in accomplishing change. What we suggest is enhancing liquidity, which has already been observed in other domains. As an example, John Wooden, the basketball coach at UCLA that won 10 NCAA national championships, said, “It's the little details that are vital. Little things make big things happen.” Similarly, Admiral William H. McRaven, commanding officer of U.S. special operations forces in Europe and Africa (also in charge of the Bin Laden raid) stated: “If you can’t do the little things right, you will never do the big things right.”

On June 7, 2019, I presented the concept of the liquid organization to more than 30 attendees at the CEO Club at WorldCity . An interesting subject that was raised in the discussion was how to make firms built on individual expertise (e.g., physicians, lawyers, tax accountants) more liquid. These firms are characterized by deep expertise or specialization, and a focus on one-to-one relationships—factors that reduce liquidity. I think that specialist firms can become more liquid and I demonstrated this using physician practices as an example. Traditionally, physicians with specialization (e.g., pediatricians, interventional cardiologists) practiced alone. However, like-minded physicians started group practices where doctors saw any patient (not just their own), and patients had access to multiple doctors with similar expertise. Patients at a group practice could see a doctor quickly, as they did not have to wait for an appointment with a specific doctor. Similarly, doctors in a group practice could have a more flexible schedule and reduce some of the time they spent on paperwork and calls (being available in case of need). The results were very encouraging. Once patients had used a group practice, they preferred it to visiting an individual physician. Also, insurance firms and hospitals preferred to work with group practices rather than individual physicians. It is estimated that the majority of physicians in the U.S. currently belong to a group practice, and less than 17% of physicians have a solo practice. Our research finds three characteristics of successful physician group practices. The first characteristic is that although each physician in a group can have super specialization, they need to be able to see 90% of the patients that come to the practice; in other words, they need to be generalists first and specialists second. The second characteristic is heightened attention to patient data: physicians need to provide detailed notes on patients, allowing other physicians to quickly understand patient history. The third characteristic is culture: successful group physicians like working with their colleagues, and have a transparent culture and robust process improvement focus. As an example, successful group practices examine each adverse incident transparently, do a root-cause analysis, and take corrective actions. Specialist firms (e.g., legal and accounting firms) can become liquid by following the same principles. First, firms need to hire and promote specialists that can address 90% of their clients’ needs. The second change, which is more difficult, is to create a process of capturing client details so that other specialists can work with the client. Most firms will need to develop a customer data capture process, which will be disruptive to current processes and requires patience and an implementation focus. The third and most important change is to develop a culture of cooperation, transparency, and continuous focus on process improvement. The cultural focus needs to come from top management, and recruitment and promotion decisions need to incorporate culture.

I was in Stockholm and observed two examples of liquidity on the water. When lighthouses could not be built in waters that were too deep or unsuitable for lighthouse construction, or needed to be moved depending on the season (frozen ice), a lightvessel, or lightship, was used (a ship that acts as a lighthouse with a light mounted on its mast). We provide a picture of Finngrundet, a lightvessel that was built in 1903, which increased the liquidity of lighthouses. Similarly, when large cruise ships anchor in areas that do not have the facilities to disembark passengers, they use tenders to transport passengers to land. This allows cruise lines to anchor in the middle of a river or bay, allowing ships to go to more locations and be more liquid, as shown in the picture.